2 Downtrodden Real Estate Companies to Watch

Not all beaten-down stocks should be considered apt investments, but some can offer massive gains when the market favours them.

| More on:
man window buildings

Image source: Getty Images

Not all discounted and downtrodden stocks are worth buying, especially if their downward spiral or stagnation period is still in full swing. However, these are the stocks that should be on your watchlist, because if you can buy right after they experience an uptick that marks the start of a relatively long bullish phase, you might get robust returns in a relatively short amount of time.

With that in mind, two real estate companies should be on your radar.

A real estate tech company

Real Matters (TSX:REAL) is an Ontario-based company that makes most of its revenue across the border. It’s a real estate-oriented tech company that has established a platform that caters to a network of field agents and serves as a marketplace for mortgage companies and real estate insurance companies. And despite what the stock might reflect, the platform has done well for itself.

For example, it has already attracted three-fifths of the 100 largest mortgage lenders in the United States. The company also boasts a decent 95% retention rate. In 2021, the company made the bulk of its net revenue from the U.S. title market, and only 4% came from Canada.

While not undervalued, this real estate stock is genuinely downtrodden. The stock has been going down well before the current market-wide slump (since Aug 2020) and has fallen roughly 84% till now. At its current price, it might offer you over six-fold growth just by re-reaching its last peak.

A residential real estate company

If you want access to residential real estate but are not sure about the REIT route, there are a few other alternatives, and one that stands out among the rest is Tricon Residential (TSX:TCN). The company has developed a sizeable portfolio of single and multi-family properties — i.e., about 35,000 spread out across North America.

The bulk of the portfolio is across the border, and the company has an impressive presence in 11 states (mainly across coastlines). It rents out these properties are competitive market prices, though the characteristic strength of the company is well-managed properties.

The stock is currently trading at a 22% discount, which might not exactly be considered “downtrodden.” However, it is still quite a discount, especially if you take the low valuation into account. However, the stock’s performance, especially the pre-pandemic one, should be considered before you make a decision.

Between mid-2017 and Feb. 2020, before the stock fell in the crash, the stock had gained less than 1%. And even though it saw rises and falls, the overall performance was essentially stagnant. However, the post-pandemic growth has been quite an exception — 200% in roughly two years.

So, if you are hopeful about that bullish trend continuing in the future as well (especially considering the valuation), you may take advantage of the dip. You might also get a yield better than the current 1.8%.

Foolish takeaway

Only one of the two is currently an undervalued stock, but the Real Matters discount and the return potential, if the stock ever recovers, make it an even more compelling buy. However, it would be smart to track the company’s financials for the past three or four years before you make a decision. Strong earnings in a single quarter can trigger Real Matters’s stock recovery.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium service or advisor. We’re Motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer, so we sometimes publish articles that may not be in line with recommendations, rankings or other content.

Fool contributor Adam Othman has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Tricon Capital. The Motley Fool recommends Real Matters Inc.

More on Dividend Stocks

A bull and bear face off.
Dividend Stocks

The 3 TSX Stocks to Buy Before a Long-Term Bull Market Begins to Build

The TSX may not go bullish for a while, even when the economy recovers from a recession, but investors should…

Read more »

Various Canadian dollars in gray pants pocket
Dividend Stocks

TFSA Investors: Make $200 in Monthly Passive Income With This 1 TSX Dividend Stock

Here’s an attractive dividend stock TFSA investors can buy now to earn $200 in monthly passive income.

Read more »

A plant grows from coins.
Dividend Stocks

TFSA Investors: How to Create $40,000 in Returns and Passive Income in 30 Years

If you think you'll need just $40,000 in passive income per year in retirement, your TFSA can get you there…

Read more »

stock analysis
Dividend Stocks

Buy These TSX Dividend Shares Next Week

Are you looking for dividend stocks to add to your portfolio? Buy these picks next week!

Read more »

edit Safety First illustration
Dividend Stocks

3 of the Safest Dividend Stocks in Canada

These three dividend stocks are all high-quality companies with defensive operations, making them some of the safest investments in Canada.

Read more »

A person builds a rock tower on a beach.
Dividend Stocks

3 Stocks to Anchor Your Portfolio in a Rocky Market

Three stocks are solid anchors in any portfolio today for their outperformance in a weak market and defiance of the…

Read more »

money cash dividends
Dividend Stocks

3 Solid Dividend Stocks That Cost Less Than $30

Given their solid financials and healthy cash flows, the following under-$30 dividend stocks are a good buy in this volatile…

Read more »

grow money, wealth build
Dividend Stocks

2 High-Yield Dividend Stocks With Rock-Solid Payout Ratios

These two dividend stocks offer unbelievably high yields of more than 7% and earn more than enough free cash flow…

Read more »